european court of auditors - the instrument for structural policies for pre-accession (ispa),...

8/9/2019 EUROPEAN COURT OF AUDITORS - THE INSTRUMENT FOR STRUCTURAL POLICIES FOR PRE-ACCESSION (ISPA), 200

1/44

2 0 0 8

THE INSTRUMENT FOR STRUCTURAL

POLICIES FOR PRE ACCESSION ISPA ,2000 06

EUROPEAN COURTOF AUDITORS

S p e c

i a l R e p o r t

N o

1 2

EN


2/44


3/44

THE INSTRUMENTFOR STRUCTURAL POLICIESFOR PRE ACCESSION ISPA ,2000 06

Special ReportNo 12 2008

EUROPEAN COURT OF AUDITORS

(pursuant to Article 248(4), second subparagraph, of the EC Treaty)


4/44

Special Report No 12/2008 The Instrument for Structural Policies for Pre-Accession (ISPA), 200006

2

EUROPEAN COURT OF AUDITORS12, rue Alcide De Gasperi1615 LuxembourgLUXEMBOURG

Tel. +352 4398-45410Fax +352 4398-46430E-mail:[email protected]: http://www.eca.europa.eu

Special ReportNo 12 2008

More information on the European Union is available on the Internet (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2009

ISBN 978-92-9207-161-5

doi: 10.2865/55186

European Communities, 2009

Reproduction is authorised provided the source is acknowledged.

Printed in Belgium


5/44


3

CONTENTS

Paragraph

GLOSSARY

I VI EXECUTIVE SUMMARY

1 6 INTRODUCTION

1 2 ASSISTANCE TO EU APPLICANT COUNTRIES3 6 ISPA MANAGEMENT AND FINANCIAL RESOURCES

7 12 AUDIT SCOPE AND APPROACH

13 42 AUDIT OBSERVATIONS

13 24 WAS THERE A COHERENT STRATEGY AND ADEQUATE PREPARATION SUPPORTING ISPA ACTIONS?13 15 GENERAL FRAMEWORK AND AUDIT CRITERIA16 19 WELL TARGETED ISPA STRATEGIES20 21 THREE IMPORTANT GUIDANCE DOCUMENTS NOT AVAILABLE FROM THE BEGINNING OF ISPA22 24 WEAKNESSES IN FINANCIAL AND COST BENEFIT ANALYSIS CBA

25 36 WERE PROJECTS IMPLEMENTED ACCORDING TO PLAN?25 26 GENERAL FRAMEWORK AND AUDIT CRITERIA27 32 ALMOST ALL PROJECTS WERE DELAYED33 36 FINANCIAL PLANS NOT IMPLEMENTED AS SCHEDULED

37 42 WERE PROJECTS CONTRIBUTING TO BENEFICIARY COUNTRIES COMPLIANCEWITH THE EU ENVIRONMENTAL DIRECTIVES AND TO THE IMPROVEMENT OF TEN T?

37 38 GENERAL FRAMEWORK AND AUDIT CRITERIA39 40 COMPLIANCE WITH EU ENVIRONMENTAL STANDARDS HAS INCREASED41 42 IMPROVEMENTS IN LINKS TO THE TRANS EUROP EAN TRANSPORT NETWORK

43 CONCLUSIONS AND RECOMMENDATIONS

ANNEX I ISPA PROJECT MANAGEMENT STAGES AND KEY COMMISSION ACTIVITIES

REPLY OF THE COMMISSION


6/44



7/44


5

GLOSSARY

Cohesion Fund: Instrument designed to promote economic and social cohesion by financ-ing large projects in the fields of the environment and transport in Member States witha per capita GDP of less than 90 % of the Community average. The Cohesion Fund wasoriginally implemented in Spain, Greece, Ireland and Portugal. Since 1 January 2004,Ireland has no longer been eligible. After their accession to the EU, the ongoing ISPAprojects of the new Member States were converted into Cohesion Fund projects.

Costbenefit analysis (CBA): A technique for comparing all the costs and all the benefitsof an intervention to determine whether the benefits outweigh the costs, and if so, bywhat proportion.

Financing memorandum: Agreement defining the budgetary commitments of a project,as well as the physical and financial indicators to be used to monitor the performanceof the project.

ISPA manual: Manual intended to ensure that ISPA projects programming and imple-mentation are undertaken according to best practices. It covers the whole project cycleand provides practical guidance of the ISPA and coordination regulations.

National sectoral strategies: Framework for project identification, including criteria toselect and appraise project proposals in the environment and transport sectors.

Phare : The Programme of Community aid to the countries of central and eastern Europe(Phare) was the main financial instrument of the pre-accession strategy for the centraland east European countries (CEECs) which have applied for membership of the Euro-pean Union. Although the Phare programme was originally reserved for the countriesof central and eastern Europe, it is set to be extended to the applicant countries of thewestern Balkans.

PRAG: Practical guide providing guidelines for tendering and contracting for Phare andISPA projects.

Project application: Set of documents consisting of a standard form and supportingdocuments (e.g. feasibility study, design, cost/benefit and financial analysis, environmen-tal impact assessment) describing and justifying the proposal. It also includes supervisionand quality control mechanisms.

Regulations: There are two main regulations governing ISPA:Council Regulation (EC) No 1266/1999 of 21 June 1 999 on coordinating aid to the appli-cant countries in the framework of the pre-accession strategy and am ending Regulation(EEC) No 3906/89 (OJ L 161, 26.6.1999, p. 68) (coordination regulation).Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument forStructural Policies for Pre-accession (OJ L 161, 26.6.1999, p. 73); amend ed by Regulation(EC) No 2382/2001 (OJ L 323, 7.12.2001, p. 1) (ISPA regulation).

Sapard : Special accession programme for agriculture and rural development.


8/44


6

EXECUTIVE

SUMMARY


9/44


7

I .ISPA was one of the instruments to assis t thecandida te count r ies o f cen t ra l and eas te rnEurope in the prepara t ion for access ion inthe period 20002006. I ts object ives were tohelp candidate countr ies to apply EU envi-r o n m e n t a l s t a n d a r d s a n d t o u p g r a d e a n dexpand transport networks, including l inkswith the trans-European netw ork. It also pro-vided experience in the management of EUfunds for large infrastructure projects . Theto ta l f inanc ia l a l loca t ion was 7 280 mi l l ioneuro.

II.The Court reviewed this instrument by ask-ing whether there was a coheren t s t ra tegyand adequa te p repara t ion to suppor t ISPAactions, whether projects were implementedaccording to planning and whether projectswere contr ibut ing to beneficiary countr iescompliance with the EU environmenta l direc-t ives and contr ibut ing to the improvementof TEN-T.

III .The Court concludes that there was a coher-en t s t ra tegy, bu t p ro jec t s were no t a lwaysadequately prepared. Three important meth-odolog ica l gu idance documents were pro-v i d e d l a t e i n r e l a t i o n t o t h e f i r s t w a v e o f appl icat ions.

EXECUTIVE

SUMMARYIVPro jec t s were no t implemented accord ingto p lanning ; there were s ign i f ican t de laysand cons iderab le changes in the f inanc ingplans.

V.The projects audi ted by the Court increaset h e c o m p l i a n c e w i t h t h e E U s t a n d a r d s o ri m p r o v e t h e l i n k s t o t h e t r a n s - E u r o p e a nne twork .

VI.T h e C o u r t r e c o m m e n d s t h a t t h e C o m m i s -s i o n m a k e a f o l l o w - u p o f I S PAs i m p l e -menta t ion and examine how de lays cou ldbe avoided or reduced in the fu ture , whenimplement ing a s imi la r ins t rument . In th i scontex t , the Commiss ion should make theg u i d a n c e d o c u m e n t s a v a i l a b l e b e f o r e t h ec a n d i d a t e c o u n t r i e s s t a r t p r e p a r i n g t h e i rp r o j e c t s a n d g r e a t e r a t t e n t i o n s h o u l d b edevoted to reduce t ime needed to comp leteprocedures.


10/44


8

INTRODUCTION

ASSISTANCE TO EU APPLICANT COUNTRIES

1. The Instrument for Structur al Pol icies for Pre-Accession (ISPA) is oneof the three f inancial instruments (with PHARE and Sapard) to assis tcandidate countr ies in the preparat ion for accession. ISPA was set upin 1999 to contr ibute to the process of preparat ion for accession tothe European Union concern ing envi ronment and t ranspor t1 in theformer candidate countr ies of central and eastern Europe2, a long thesame l ines as the Cohesion Fund model designed for the least pros-perous EU members (see Figure 1 ) . I t a lso helped candidate countr iesprepare for the management of EU funds af ter accession, by providingexperience in their use for large infrastructure projects .

1 Article 1 of Regulation (EC)No 1267/1999.

2 Bulgaria, Czech Republic, Estonia,Hungary, Latvia, Lithuania, Poland,Romania, Slovakia and Slovenia.

ISPA INTERVENTION LOGICF I G U R E1

NEEDS Improvement of the environmental standards Improvement of the transport infrastructure

OBJECTIVES Bringing countries up to EU environmental standards Extending trans-European networks

INPUTS Commission coordination ISPA and national funds ISPA strategies, nancing memoranda, Commission decisions Staff

PROCESSES Building and improving infrastructure in the environment

and transport sectors

OUTPUTS New and/or rehabilitated water treatment systems Kilometres of new road or rail network or improved network

RESULTS IMPACTPercentage of households/businessesserved, time saved, accessibility gain

Environmental impact; improvedwater qualitySmoother traffi c ows, improvedroad/rail network


11/44


9

2. ISPA operated during the programming period 200006. From January2007 onwards, s imilar act ions have been f inanced under the Instru-ment for Pre-Accession Assis tance (IPA)3.

ISPA MANAGEMENT AND FINANCIAL RESOURCES

3. Figure 2 shows the framework within which proj ects are developed andapproved .

ISPA PROCEDURAL FRAMEWORKF I G U R E2

3 IPA covers Croatia, the formerYugoslav Republic of Macedonia,Turkey, Albania, Bosnia andHerzegovina, Montenegro, Serbiaand Kosovo under UN SecurityCouncil Resolution 1244/99.

Programming for the Instrument for Structural policies for Pre-Accession

National ISPA strategySetting sectoral strategies and the list of priority projectsPrepared by the candidate country

Project applicationContaining detailed project description

AppraisalFollowed by two interservice consultations

Commission decision

Financing memorandumCo-signed by the candidate country

Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for Structural Policiesfor Pre-Accession

Council Regulation (EC) No 1266/1999 of 21 June 1999 on coordinating aid to the applicant countries inthe framework of the pre-accession strategy

Accession partnershipPriority areas of acquiscommunautairePrepared by the Commission

National programmeAction plan for preparationfor accessionPrepared by candidatecountry

National development plandevelopment strategyprepared by candidatecountry

G u

i d e

l i n e s

I S P A m a n u a l

C B A g u

i d e

l i n e s

O b l i g a t o r y o p

i n i o n

I s s u e

d b y t h e

I S P A

M a n a g e m e n t

C o m m

i t t e e

The Commission


12/44


10

4. The total allocation for ISPA was 7 280 million euro for the period 200006(1 040 mil l ion euro in 1999 prices per year4) , to be dis t r ibuted amongthe beneficiary countr ies on the basis of selected cr i ter ia . ISPA aimedat us ing these funds accord ing to an appropr ia te ba lance be tweenmeasures in the f i e ld o f the env i ronment and measures re la t ing totransport infrastructure.

5. In total , 366 projects were approved for ISPA, of which 201 were in theenvironment sector, 78 in the t ransport sector and 87 concerned tech-nical assistance. The ISPA budget (in 2006 prices), before amendment sand excluding technical assis tanc e was 7 708 mil l ion euro5. The con-tr ibut ion to ISPA projects in the environment sector was 3 804 mil l ioneuro and in the transport sector 3 904 million euro. In the environmentsector (see Figure 3 ) , the majori ty of the 201 projects (73 %) were inthe f ie ld of wastewater t reatment and water supply. In the t ransportsec tor, the 78 ISPA pro jec t s were main ly (97 %) in the ra i lways andin the roads and motorways sectors (see Figure 4 ) .

DISTRIBUTION OF ISPAENVIRONMENTPROJECTSF I G U R E3

4 Article 4 of Regulation (EC)No 1267/1999 and Annex II tothe interinstitutional agreementof 6 May 1999 between theEuropean Parliament, the Counciland the Commission on budgetarydiscipline and improvement of thebudgetary procedure(OJ C 172, 18.6.1999).

5 Commission, Regional Policy DG,situation at 31.12.2007.

No of projects: 9Share 4 %





Combined sewage networksand treatment plants

Drinking water supply

Combined wastewater treatmentand drinking water supply

Solid waste management

Other


13/44


11

6. The co-financing rate of ISPA may be up to 75 % of public or equivalentexpenditure 6. The nat ional contr ibut ion sometimes took the form of loans granted by f inancial inst i tut ions such as the European Invest-ment Bank (EIB) and the European B ank for Reconstruct ion and Devel-opment (EBRD).

DISTRIBUTION OD ISPATRANSPORTPROJECTSF I G U R E4

6 For projects consideredessential for achieving the generalobjectives of ISPA, this rate can beincreased up to 85 % accordingto Article 6(2) of Regulation (EC)No 1267/1999.

Roads and motorways

Railway

Other


No of projects: 37

Share 47 %



14/44


12

AUDIT SCOPE AND APPROACH

7. The implementation of ISPA in the candidate countries represented anini t ia l exposure to large-scale investments co-f inanced by the Euro-pean Union . For th i s reason , in v iew of the impor tance of ISPA forthe access ion of the candida te count r ies and f ind ings of p rev iousaudits 7, the Court decided to carry out a n audi t of ISPA to answer th efol lowing quest ions.

Was there a coherent s t rategy and an adequate preparat ion sup-(a )port ing ISPA act ions?

Were projects implemented according to planning?(b)

Were projects contr ibut ing to beneficiary countr ies compliance(c)with the EU environmental direct ives and to the improvement of TEN-T?

8. ISPA was programmed for the period 200006 and the majori ty of thebeneficiary countr ies acceded to the EU in May 2004. As at 31 Decem-ber 2007, f inal reports on only a l imited number of the 279 infrastruc-tu re p ro jec t s were ava i lab le . As such , the Cour t cou ld on ly make aprel iminary assessment of the performance and achiev ements of theprojects .

9. A sample of 32 projects adopted between 2000 and 2003 (16 environmentand 16 t ransport) covering s ix beneficiary countr ies was examined.S ix teen pro jec t s were v i s i t ed on the spo t (e igh t env i ronment andeight t ransport) in the Czech Republic , Poland, Latvia and Romania.The o ther 16 pro jec t s were sub jec t to a desk- rev iew. They concernthe abovementioned countr ies plus Hungary and Bulgaria .

10. File reviews and interviews were carr ied out both at the Commissionheadquarters and Commission delegations. In the candidate countries,meet ings were held with the Ministr ies of Environment and Transport ,regional and local authori t ies , as wel l as with f inal beneficiar ies .

11. In addition, the Court carried out a survey by sending questionnaires to155 project managers and bodies responsible for day-to-day manage-ment of projects8 in the four countries visited, in order to collect opinionson the most common problems encountered during ISPA implementa-tion. The Court received 145 answers9 (93 % response rate).

12. Moreover, the Court obtained advice from experts in environment andtransport projects f rom internat ional f inancial inst i tut ions.

7 The Courts Special ReportNo 5/2003 concerning Phare andISPA funding of environmentalprojects in the candidatecountries (OJ C 167, 17.7.2003,p. 1), Special Report No 15/2000on the Cohesion Fund (OJ C 279,2.1.2000, p. 1) and Special ReportNo 6/2005 on the trans-Europeannetwork for transport (TEN-T)(OJ C 94, 21.4.2006, p. 1).

8 The project managersrepresented 42 % of ISPA projectsin the environment and transportsectors.

9 For technical reasons suchas incorrect completion of thequestionnaire or incomplete reply,127 replies were usable (82 %).


15/44


13

AUDIT OBSERVATIONS

WAS THERE A COHERENT STRATEGY AND ADEQUATEPREPARATION SUPPORTING ISPA ACTIONS?

GENERAL FRAMEWORK AND AUDIT CRITERIA

13. National ISPA strategies for the environment and transport sectors wereprepared by each beneficiary country at the request of the Commis-sion. Their purpose was to define the priority objectives by identifyingsector and sub-sector pr ior i t ies and geographical pr ior i t ies such astransport bot t lenecks or environmental black spots , and to ident i fythe resources needed. The nat ional ISPA strategies should also pro-vide the framework for project ident i f ica t ion and set out the cr i ter iato be used to select and appraise proposed projects (see Annex I ) .

14. Candidate countries submitted an application to the Commission whichhad to contain, inter a l ia , the fol lowing elements10 :

the t imetable for implementat ion of the works;(a )

a costbenefi t analysis ;(b )

the f inancial plan, including f inancing sources other than ISPA.(c)

15. The Court analysed the strategy documentation, and th e preparation of ISPA projects , checking whether:

the nat ional sectoral s t rategies contained an assessment of sec-(a )toral needs in the f ie lds of environment and t ransport designedto ca tch up wi th EU envi ronmenta l s tandards and upgrade andexpand l inks with t rans-European t ransport networks;

the Commiss ion deve loped on t ime manua ls and gu ide l ines to(b)enable candida te count r ies to submi t p roposa l s con ta in ing a l lthe relevant information.

10 Article 7(3)(a) of and Annex I toRegulation (EC) No 1267/1999.


16/44


14

WELL TARGETED ISPA STRATEGIES

16. The Commissions framework documents for the environment and trans-port sectors proved to be effect ive in set t ing out the key cr i ter ia forthe prepara t ion of na t iona l ISPA s t ra teg ies which inc luded genera lpr ior i t ies and ident i f ied projects to be implemented with ISPA sup-port (see Textbox 1 ) .

17.In the cases where shortcomings were identified, the Commission providedsupport in order to address these weaknesses (see Textbox 2 ) .

In the case o Latvia, in the environment sector, the main ocus or ISPA was to concentrate on projects whichenabled the country to comply with the requirements o Community environmental law and with the objectiveso the accession partnership. Te strategy identifes and selects projects to be proposed or fnancing under ISPAthat are consistent with the abovementioned criteria. Te selection o ISPA projects was based on the governmentguidelines, which took into consideration assumptions o environmental policy.

T E X T B O X1

In Romania, the updated 2003 version o the national transport strategy did not receive unreserved consent romthe Commission due to several shortcomings. In order to address these shortcomings, the Commission decidedto grant a technical assistance project aimed at dra ing a general transport master plan.

T E X T B O X2


17/44


15

Action to protect the environment in the Baltic region was initiated by the Polish government at the beginning o the 1990s in cooperation with other countries. Te region o Krakow was already identifed in the Helsinki Con- vention12 as one o the hot spots or the protection o the Baltic Sea, as this area, even though ar rom the coast,contains a high density o industries discharging waste into the Vistula River, which ows into the Baltic Sea. Acommon solution or the whole urban area o Krakow was prepared and included in the national programme orpurifcation o communal wastewater. Te project o a sewage treatment plant in Krakow was then included in thenational ISPA strategy or the environment in 1999, to be implemented as one o the priority projects.

T E X T B O X3

In Latvia the main objectives o the national environment policy plan, which was approved in 1995, were to enablethe country to comply with the requirements o the Community environmental legal ramework and with theobjectives o the accession partnership. Te objectives o this policy plan were taken over in the national ISPAstrategy or the environment. Te selection process or the projects was based on these objectives.

T E X T B O X4

18. Even though in some cases it wa s not possible to explain the ranking of inves tment p ro jec t s 11 , an examina t ion of the s t ra teg ies o f the fourcountr ies vis i ted has enabled the Court to conclude that , in general ,nat ional sectoral ISPA strategies clear ly ident i f ied the needs in eachcountry, a lso taking into considerat ion the exis t ing nat ional planningdocuments (see Textbox 3 ) . Nat ional ISPA strategies acted as a toolin the select ion of ISPA projects , l inking object ives and prior i t ies tospecif ic project proposals .

19. In some cases the national ISPA strateg ies were a development of exist-ing nat ional s t rategies that had already taken into considerat ion theneed to adopt the acquis communautaire in the f ie ld of the environ-ment (see Textbox 4 ) .

11 This has been pointed out alsoin the Courts Special ReportNo 5/2003 (shortcomings instrategies, paragraphs 18 to 20).

12 Helsinki Convention: convention on the protection o the marine environment o the Baltic Sea area, signed in 1974 andrevised in 1992 which concerns all the states bordering on the Baltic Sea. he convention covers the whole o the BalticSea area, including inland waters as well as the water o the sea itsel and the sea-bed. Measures are also taken in the wholecatchment area o the Baltic Sea to reduce land-based pollution.


18/44


16

THREE IMPORTANT GUIDANCE DOCUMENTS NOT AVAILABLEFROM THE BEGINNING OF ISPA

20. Three main guidel ines were developed by the Commission and madeavai lable for project preparat ion.

An ISPA manual w as provided to the beneficiary countr ies in 2000,(a )during the preparat ion phase of the f i rs t project appl icat ions.

A second version of the ISPA manual was developed in 2002, c lar i -(b )fying in part icular the tendering and contract ing procedures.

Updated gu idance on cos tbenef i t ana lys i s was m ade ava i lab le(c)in 2002, which addressed weaknesses ident i f ied in the previousversion. In part icular i t gave average rates of return and recom-mended t ime horizons for different sectors . However, i t did notprovide any detai ls or forecast ing techniques concerning impactson the env i ronment .

21. These methodological guides were developed after the projects auditedby the Court were submit ted to the Commission for approval . This la teavai labi l i ty l imited their contr ibut ion to famil iar is ing the candidatecount r ies wi th the po l ic ies , p rocedures and the funding pr inc ip lesof the EU.

WEAKNESSES IN FINANCIAL AND COST BENEFITANALYSIS CBA

22. Each appl icat ion for ISPA assis tance had to contain a f inancial and acos tbenef i t ana lys i s . For some pro jec t s these were no t ava i lab leor presented weaknesses. Nevertheless , the Commission consideredtha t , s ince mos t o f the p ro jec t s were requ i red to fu l f i l bas ic needsin the candida te count r ies , i t was no t appropr ia te to ho ld them upbecause of shortcomings in the costbenefi t analysis .


19/44


17

23. The Courts review of the financial and costbenefit analyses prov idedfor the projects audi ted ident i f ied the fol lowing weaknesses13 :

some missing information about discount rates used and scenario(a )assumptions where a r isk analysis was presented;

incons i s tenc ies o f CBA and f inanc ia l ana lyses f igures be tween(b)different documents for the same project ;

unsubs tan t ia ted soc io-economic benef i t s and incomple te es t i -(c)mates of effects in the t ransport sector.

24. In these circumstances, the Commission was unable to confirm from thecos tbenef i t ana lys is tha t the p ro jec t s submi t ted by the candida tecountr ies represented in relat ive terms the highest added value.

WERE PROJECTS IMPLEMENTED ACCORDING TO PLAN?


25. After the assessment of project appl icat ion and approval by the Com-mission, a f inancing memorandum was s igned defining, in part icular,the f inanc ia l resources and p lanning for implement ing the pro jec t ,including the complet ion date . After project complet ion, candidatecountr ies had to present a f inal report .

26. The Court assessed to what extent the main conditions set in the financ-ing memorandum had been respected, that is :

whether projects had been implemented according to ini t ia l plan(a )and the reasons for any delay;

whether the f inancial plans for the projects had been respected(b)and i f not , the reasons why.

13 See also Special ReportNo 5/2003 (weaknesses in projectappraisal, paragraphs 30 to 34)and Special Report No 6/2005(weaknesses in evaluationand selection of projects,paragraphs 30 to 43).


20/44


18

ALMOST ALL PROJECTS WERE DELAYED

27. If projects are delivered later than expect ed, the benefits are deferred andthe problems they are intended to address cont inue for longer thannecessary. Delays a l so c rea te uncer ta in t ies , as the soc io-economicenvi ronment may change and may make i t d i ff i cu l t to implementprojects as foreseen.

28.The 32 projects in the Courts sample were approved between 2000and 2003 . The major i ty o f the p ro jec t s aud i ted should have beencompleted between 2004 and 2006 according to the ini t ia l f inancialmemoranda . However, on ly f ive had been comple ted by the in i t i a lexpected date 14 at the t ime of the audi t ( two in the Czech Republicand th ree in La tv ia )15 . For the other 27 projects , the complet ion datewas amended. The delays vary from 2 to 5 years (Poland), 4 to 4.5 years( B u l g a r i a ) , 2 t o 4 . 8 y e a r s ( R o m a n i a ) , 1 . 5 y e a r s ( H u n g a r y ) a n d 1 t o3 years (Latvia) . In the Czech Republic , there were no major delays.

29. In the survey addressed to the project managers in the four audi tedcount r ies , the Cour t ob ta ined in format ion on the de lays in imple-mentat ion and the reasons for the delays.

30. In the environment sector, the average scheduled duration of the projectswas 5 years and in the transport secto r, 4.2 years. According to the sur-vey, the average delay was 2.5 years in both sectors (seeFigure 5 ) .

31. In the projects audited, the Court found that the main reasons for delayswere 16 :

the l ack of fami l ia r i ty o f the candida te count r ies wi th EU pro-(a )cedures and with project preparat ion and implementat ion as wellas diff icul t ies with procurement procedures (see e .g.Textbox 5 )(84 % of the projects in the sample);

fai lure of companies that won tenders to carry out the work (see(b)e.g. Textbox 6 ) (13 % of the projects in the sample);

unreal is t ic planning (see e .g.(c) Textbox 7 ) (22 % of the projects inthe sample);

the change a f te r access ion of the ISPA pro jec t s in to Cohes ion(d)Fund projects , which have a different set of rules17 .

14 A project is consideredcompleted when the infrastructureis in use. Candidate countrieshad to submit a final report tothe Commission at the latest sixmonths after the completion of theproject.

15 Out of 32 projects audited,24 faced delays (75 %).

16 Some projects were affected bymore than one of the problemsdescribed.

17 E.g. eligibility of durableequipment expenditure(to be solved on a case-by-casebasis), modifications of projectdecisions, procedures for theaward of public contracts.


21/44


19

AVERAGE DELAYS IN PROJECT IMPLEMENTATIONF I G U R E5

In Latvia, in a project or the development o water services, it took three years to launch the tender procedurea er the signature o the fnancing memorandum.

In Poland, in a project or sewage treatment, the construction su ered an interruption o almost one year dur-ing the tendering phase. Te project was divided into subcontracts, one o which was co-fnanced by the EBRD.According to the EBRD loan agreement, the banks tendering rules should have been applied to the procuremento the whole project. Te tendering had to be stopped until the appropriate procedures had been agreed betweenthe donors.

T E X T B O X5

A project or the rehabilitation o sewage network and wastewater treatment acilities aced delays in implemen-tation. Te tender had to be cancelled and repeated, due to problems with the composition o the evaluationcommittee. In addition, the company which was awarded the contract in the second tender ailed to proceed withthe works in accordance with the timetable and ailed to comply with several notices by the supervising engineer.Te contract there ore had to be terminated. A third tender had to be organised, but at the time o the audit theproject was at a standstill.

T E X T B O X6

In Latvia, a project to develop water services was delayed because, amongst other reasons, the cost and the timeneeded or the study and design work or the pipelines were underestimated.

T E X T B O X7

Y e a r s

Average per country/sector

Average initial duration Delay

PL CZ RO LV ENV PL CZ RO LV TRAN TOTAL0

1

2

3

4

8

7

6

5

9


22/44


20

32. The survey indicates that the main reasons for not respecting the dead-l ines in the implementat ion of the project s are , on the one hand, thelength of the procedures and, on the other hand, planning reasons(see Figure 6 )18 .

FINANCIAL PLANS NOT IMPLEMENTED AS SCHEDULED

33. In 18 ou t o f 32 pro jec t s aud i ted the in i t i a l f inanc ia l p lan was no trespected. In s ix cases the total cost increased, and in 12 cases thec o s t d e c r e a s e d . W h e n t h e c o s t i n c r e a s e d a n d n o a d d i t i o n a l I S PAresources were made ava i lab le , candida te count r ies had to f inancethe addi t ional costs f rom their own resources (see Textbox 8 ) .

18 Problems in projectimplementation were also pointedout by the Court in its SpecialReport No 5/2003 (insufficientmanagement resources, delays,difficulties in tendering,paragraphs 35 to 39) but also in itsSpecial Report No 6/2005 (delaysin implementation of projects,paragraphs 11 to 25).

REASONS FOR DELAYS PROJECT MANAGERSF I G U R E6

What were the reasons for delays?

Procedural reasons Planning reasons

Appeals from bidders8 %

Repetitionof the procedure

15 %Other11 % Unrealistic planning

15 %

Low quality

of tendering documents6 %Frequent changesof PRAG

10 %

Time-consuming EUprocedures

26 %

Complicatedlocal law

9 %


23/44


21

In Latvia, in a railway project, due to price increases, the ISPA grant was not su cient to cover all the elementsinitially oreseen. Te remaining work had to be unded rom national resources.

T E X T B O X8

In Latvia, in a project to develop water services, the contractor repudiated the contract because he was no longerin a position to work at the agreed prices as rapid in ation occurred shortly a er the start o the works. Tis ledto a revision o the contract, with an increased cost.

T E X T B O X9

CHANGES TO THE ORIGINAL FINANCING PLANS

SURVEY OF PROJECT MANAGERS

Replies Changes to the original nancing plan

Maintenance of the original nancing plan

123 66 % 34 %

TA B L E1

34. As shown inTable 1 the survey of project managers indicates that forthe majori ty of ISPA projects changes had been made to the or iginalf inancing plan.

35. In five cases out of the 32 projects of the sample this can be explained byunderest imation of inf lat ion ( in 16 % of the cases) (seeTextbox 9 ) .


24/44


22

36. The replies to the survey of project managers indicated that the reasonsfor cost overruns can be explained mainly by two categories of fac-tors (see Figure 7 ) :

p r o b l e m s i n p r o j e c t p r e p a r a t i o n , s u c h a s i n a d e q u a t e c o s t(a )est imates;

i m p l e m e n t a t i o n p r o b l e m s , s u c h a s w e a k m o n i t o r i n g o r t i m e(b)delays.

COST OVERRUNSF I G U R E7

In case of overruns, what were the main reasons?

Planning-related reasons Implementation-related reasons

Other19 %

Technicalreasons

9 %Inadequate costestimates

20 % Weak monitoring14 %

Time delays

12 %

Modications tothe project

26 %


25/44


23

WERE PROJECTS CONTRIBUTING TO BENEFICIARYCOUNTRIES COMPLIANCE WITH THE EU ENVIRONMENTALDIRECTIVES AND TO THE IMPROVEMENT OF TEN T?


37. The main objective of ISPA was to help the candidate countries reducetheir s t ructural gap in the environment and t ransport sectors . In orderto assess the effect iveness of the projects in terms of concrete con-tr ibut ions to improvement of the environment and t ransport sectors ,the Court examined:

whether the environmenta l projects were consistent with EU direc-(a )t ives in the f ie lds of water supply and wastewater ;

whether t ransport projects contr ibuted to the complet ion of the(b)trans-European t ransport network.

38. As at the time of the audit final reports were a vailable on only a limitednumber of the 279 infrastructure projects co-f inanced by ISPA, onlypart ia l conclusions could be drawn.

COMPLIANCE WITH EU ENVIRONMENTAL STANDARDSHAS INCREASED

39. In the env i ronmenta l sec tor, ou t o f 16 pro jec t s in the sample , on lythree were comple ted a t the t ime of the aud i t . The assessment o f these pro jec t s shows tha t , in sp i te o f some shor tcomings , they a recont r ibu t ing to compl iance wi th EU envi ronmenta l s tandards ( seeTextbox 10 ) .

In Latvia, the objective o one project was to improve water supply and sewage services, ensuring that drinkingwater and purifed sewage con orm to the national legislation and the requirements o the EU directives. Accord-ing to the fnal report, the project has ensured adequate quality o the treated water according to the EU urbanwastewater treatment directive (91/271/EEC) and o the drinking water.

In Latvia, the objective o one project was to develop drinking water quality and wastewater services. Te EUstandards or drinking water quality have been met. However, or wastewater, ull compliance with legal require-ments had not yet been achieved. Te rehabilitation and upgrading o a biological wastewater treatment plant hadbeen completed but the nitrogen and phosphorus content in the e uent still exceeded the EU and local normsat the time o the audit.

T E X T B O X1 0


26/44


24

40. In spi te of some shortcomings, the projects that were no t completeda t the t ime of the aud i t , i f implemented as p lanned , a re l ike ly toc o n t r i b u t e t o c o m p l i a n c e w i t h E U e n v i r o n m e n t a l s t a n d a r d s ( s e eTextbox 11 ) .

IMPROVEMENTS IN LINKS TO THE TRANS EUROPEANTRANSPORT NETWORK

41.In the t ransport sector out of 16 projects contained in the sample onlytwo had been completed at th e t ime of the audi t . The assessment of these projects shows that they are contr ibut ing to the complet ion/deve lopment o f t rans -European ne tworks ( see Figures 8 and 9 andTextboxes 12 and 13 ) .

42. The other projects that a t the t ime of the audi t were not completedare consis tent with the TEN-T network (see for exampleTextbox 11 and Figure 11 ) . For example in Romania , the Buchares t Cernavodaproject should speed up the t raff ic between Bucarest and Con stantaa n d i s e x p e c t e d t o c o n t r i b u t e t o t h e d e v e l o p m e n t o f E u r o p e a nTransport Corr idor No 7, IgumenitsaPatrasAthensSofiaBudapest(see Figure 10 ) .

In Poland, a wastewater treatment project should increase the percentage o the population o the city o Wrocawwho are connected to the sewage network to 97 %. Tis city, with a population o more than 600 000 inhabitants,was considered the main polluter o the river Odra.

In Romania, a project consisted o the rehabilitation and upgrading o a wastewater treatment plant, a sewagenetwork and a drinking water network. Due to delays concerning the wastewater treatment plant, the risk o pol-lution o the river remains.

T E X T B O X1 1

In the Czech Republic the project Modernisation o the line section ZaboriPrelouc is in the pan-Europeanmultimodal corridor IV rom Dresden to Bratislava. In Figure 8 , the projects co-fnanced by ISPA in the CzechRepublic are highlighted.

T E X T B O X1 2

In Latvia, the upgrading o the motorway rom Riga to Adazi, which is a section o Via Baltica linking Warsawto allinn, improved the tra c and pedestrian sa ety as well as the tra c uidity by bringing this road section incompliance with European road standards and norms (see Figure 9 ).

T E X T B O X1 3


27/44


25

ISPA PROJECTS IN THE CZECH REPUBLICF I G U R E8

D8 motorway Prague Usti nad Labem Czech/German borderSection 807 Trmice-border

Modernisation of the line sectionUsti nad Orlici Ceska Trebova

Modernisation of the line sectionZaboriPrelouc

Optimisation of Zabreh na Morave Krasikov railway section

Road R/48Frydek Mistek Dobra

Road I/48Belotin by-pass

Expressway r48DobraTosanoviceZukov,Stage I: DobraTosanovice

Trans-European transport network ISPA projectsCeska Republica

TEN railwayTEN road

EuroGeographics 2001 for the administrative boundariesCartography: Energy and Transport DG, 15/5/2008


28/44


26

ROAD NETWORK IN LATVIAF I G U R E9


LATVIJA

LEITSCHEMA DES TRANSEUROPISCHEN VERKEHRSNETZES (Horizont 2020) STRASSENTRANS-EUROPEAN TRANSPORT NETWORK OUTLINE PLAN (2020 horizon) ROADSSCHMA DU RSEAU TRANSEUROPEN DE TRANSPORT (horizon 2020) ROUTES

BestehendExistingExistant

GeplantPlannedPlani


29/44


27

TEN T NEWORKSF I G U R E1 0

PROJECT No 7Trans-European transport network

priority projects

MOTORWAY AXISIGOUMENITSA/PATRAATHINASOFIABUDAPEST


ExistingPlanned

Priority axis No 7Priority sectionsOther priority axes


30/44


28

TEN T NETWORKF I G U R E1 1


ISPA projects200408 countries

ISPA project

TEN railwayTEN road


31/44


29

CONCLUSIONS ANDRECOMMENDATIONS

43. The Courts main conclusions are as fol lows.A coheren t s t ra teg ic f ramework was in p lace and na t iona l ISPA(a)strategies proved to be a good programming tool c lear ly ident i fy-ing needs, object ives and resources. Nonetheless , projects werenot a lways adequa te ly p repared by appl ican ts . Th is was par t lydue to the fac t tha t th ree impor tan t gu idance documents wereprovided late in relat ion to the f i rs t wave of appl icat ions by theCommission (see paragraphs 16 to 24) .

Projects were of ten not implemented as planned. Financing plans(b)had to be adjusted to changed circumstances and almost a l l theprojects were experiencing s ignif icant delays, mainly related tothe length of the procedures (at th e level of the Commission andof the beneficiary countr ies) and to weaknesses in the planningprocess (a t the l eve l o f benef ic ia ry count r ies ) ( see paragraphs25 to 36) .

The Courts audi t included f ive completed projects and 27 projects(c)which are s t i l l in progress . Three of the completed pr ojects wereenvironmental . The audi t shows that they increase the compliancewi th EU envi ronmenta l d i rec t ives in the respec t ive benef ic ia rystates . The other two completed projects were t ransport re lated.The audi t shows that they contr ibute to the improvement of thetrans-European network in the respect ive beneficiary s tates . Fur-thermore, the audi t suggests that the 27 projects s t i l l in progressare l ike ly to ach ieve the ob jec t ives i f implemented as p lanned(see paragraphs 37 to 42) .

The Cour t r ecommends tha t t he Commiss ion c lose ly fo l lows up theimplementat ion of ISPA. The Commiss ion should , in pa r t icular, exam-ine how delays in the implementat ion of projects could be avoided orreduced in the fu ture , when implement ing s im i lar ins t ruments . In theCourt s v iew, th is may require more r igorous and real is t ic p lanning byprojects appl icants /manag ers and ways to speed up the procedures ,both a t the Commiss ion level and wi thin nat ional adminis t ra t ions of benef ic iary countr ies .

This report was adopted by the Court of Auditors in Luxembourg at i tsmeet ing of 11 December 2008.

For the Court of Auditors

Vtor Manuel da Si lva CaldeiraPresident


32/44


30

I S P A P R O J E C T M

A N A G E M E N T S T A G E S A N D

K E Y C O M M I S S I O N A C T I V I T I E S 1

ANNEXI

1 A

s s t a t e

d i n C o u n c

i l R e g u

l a t i o n s

( E C ) N o

1 2 6 7 / 1 9 9 9

, ( E C ) N o

1 2 6 6 / 1 9 9 9 a n

d ( E C ) N o

2 3 8 2 / 2 0 0 1

a n

d a c c o r d

i n g t o t h e

E C A a u

d i t c r i t e r i a

.

C O M P L E T I O N

R e v

i e w a n

d

a p p r o v a

l o f :

F

i n a l r e p o r t

C

l o s u r e

s t a t e m e n

t s

F i n a l p a y m e n

t

E

x p o s t

e v a l u a t

i o n

M O N I T O R I N G

S u p e r v i s i o n

o f c o n

t r a c

t

i m p

l e m e n

t a t i o n

M o n

i t o r i n g

o f p h y s

i c a l

a n d n a n c i a l

p r o g r e s s

t h r o u g

h

i n d i c a t o r s

M i d

- t e r m

e v a l u a t

i o n

T E N D E R I N G

R e v

i e w

a n d

a p p r o v a

l o f

t e n

d e r

d o s s

i e r s

T e n

d e r

e v a l u a

t i o n s ,

i n c l u d

i n g

m o

b i l i s a t

i o n

o f n e c e s s a r y

e x p e r t

i s e

S e l e c t

i o n o

f

w i n n i n

g b i d s

C o n t r a c t

i n g

A P P R A I S A L

A c t

i v i t i e s

i n c l u

d e :

a p p r a

i s a l

m i s s i o n s

t o

a p p

l i c a n

t

c o u n

t r y

m o

b i l i s a

t i o n

o f e x p e r

t i s e

r e q u

i r e d

t o

a s s e s s

t e c h n

i c a l

c o n

t e n

t o

f

a p p

l i c a t

i o n s

i n t e r - s e r v

i c e

c o n s u

l t a t

i o n

( I S C )

f o r m a l

f e e d

b a c

k

t o a p p

l i c a n

t

o n c o n

t e n

t o

f

a p p

l i c a t

i o n

P R E P A R A T I O N

A p p

l i c a t

i o n

,

i n c l u

d i n g

t h e

p r o

d u c t

i o n o

f :

f e a s

i b i l i t y s t u

d y

c o s t b

e n e

t

a n a l y s

i s

e n v i r o n m e n

t a l

i m p a c

t

a s s e s s m e n

t

n a n c i n g p

l a n

t i m e t a b

l e f o r

i m p

l e m e n

t a t i o n

g e n e r a l

m a i n

t e n a n c e

p l a n

S T R A T E G Y

P r o d u c t

i o n o

f

a n I S P A s t r a

t e g y

c o n t a i n

i n g :

p r e s e n

t a t i o n

o f p l a n

f o r

a l i g n m e n

t o

f

E U

a n d n a t

i o n a l

p o

l i c i e s

n a t

i o n a l n e e

d s

a s s e s s m e n

t

p r o

j e c t

i d e n

t i c a

t i o n

K e y a c

t i v i

t y :

f o r m a l

f e e d

b a c

k

t o

b e n e c i a r y

c o u n

t r y o n

d r a

f t

I S P A s t r a

t e g y


33/44


31


34/44


32

REPLY

OF THE COMMISSION


35/44


33

EXECUTIVE SUMMARYIII.The poor p repara t ion of some pro jec t s wasdue to a l a rge ex ten t to a l ack of capac i tyand the short t ime frame in which projectsh a d t o b e d e v e l o p e d . G u i d a n c e w a s a l s ogiven through the detailed application formsand ex is t ing explana t ions o f p rocurementprocedures.

IV.The de lays and changes in p lanning wh ichoccurred in many of the ear ly projects werehard to avo id g iven the lack of exper iencein managing major in f ras t ruc ture p ro jec t sand the need for ex ante control of tender-ing procedures.

VI.The Commission agrees with the Courts rec-ommendat ion . I t wi l l con t inue to moni torex-ISPA projects and some wil l be evaluatedin the 200006 ex post evaluat ion exercise ,paying part icular a t tent ion to cost overrunsa n d d e l a y s . T h e e x p e r i e n c e w i t h I S PA h a salready led the Commission to take s teps tooffer greater assis tance with project prepa-rat ion, such as the special EIB/Commissiontechnical assis tance faci l i ty, Jaspers . I t wil lcont inue and intensify such technical assis t -ance under the new pre-accession instrumentIPA. The Commission has also discussed theproblems of delays with Member States .

INTRODUCTION6.In pract ice, the grant rate is of ten lower than75 %. For example, in Romania the averagera te was 73 %, in Bulgar ia 56 % and in S lo-vak ia 54 %.

AUDIT SCOPE AND APPROACH9.Most of the Courts sample was selected fromamong the older ISPA projects approved inthe f i rs t or ear ly years of use of the instru-m e n t . S o m e h a d b e e n p r e p a r e d e v e n e a r -l ier. The very short t ime frame in which ISPAh a d t o b e i m p l e m e n t e d h a d i m p l i c a t i o n sf o r p r o j e c t m a t u r i t y a n d t h e r e a d i n e s s o f nat ional authori t ies .

AUDIT OBSERVATIONS13.The Commission secured the nat ional s t rat-e g i e s f o r t h e t r a n s p o r t a n d e n v i r o n m e n tsectors in the candidate countr ies based onnat ional investment plans and programmes,despi te this not being a regulatory require-m e n t . T h e s t r a t e g i e s w e r e a l s o p r e s e n t e db y t h e C o m m i s s i o n t o t h e I S PA M a n a g e -ment Committee (Member State representa-t ives) before the presentat ion of individualprojects .

19.T h e C o m m i s s i o n a c t i v e l y e n c o u r a g e dn a t i o n a l a u t h o r i t i e s t o b u i l d o n e x i s t i n gna t iona l p lans ( fo r example , to implementthe urban wastewater t reatment direct ives)because of the l imited t ime avai lable .

20.I n a d d i t i o n , g u i d a n c e w a s g i v e n t h r o u g hthe de ta i led appl ica t ion forms which werem a d e a v a i l a b l e i n 1 9 9 9 a n d p r o c u r e m e n tprocedures were explained in the guidanced e v e l o p e d u n d e r p r e v i o u s p r e - a c c e s s i o ninstruments .

(c)The previous version of the Guide to costb e n e f i t a n a l y s i s o f i n v e s t m e n t p r o j e c t s ,which explained the main pr inciples of CBA,had been avai lable s ince 1997. The 2002 ver-s ion of the guide responded to the changedregulatory environment and addressed vari-ous issues in more depth.


36/44


34

21.The ISPA regulat ions were adopted in 1999and the f i r s t ISPA manual was prov ided in2000 . The advice g iven in the ISPA manuala n d t h r o u g h v a r i o u s o t h e r c h a n n e l s ( s e erep ly to 20) had to be deve loped toge therwith the candidate countr ies concerned andt o t a k e a c c o u n t o f t h e i r i m p l e m e n t a t i o nreal i t ies which were evolving. In addi t ion toformal guidance, a major effor t was made toprepare the grou nd for ISPA in a very limitedt ime f rame, fo r example th rough meet ingsh e l d i n a l l c a n d i d a t e c o u n t r i e s f r o m 1 9 9 8onwards with support f rom Phare to prepareproject pipel ines.

22.The shortcomings in CBAs and f inancial ana-lyses were of ten due to lack of a consis tenta p p r o a c h a m o n g t h e m a n y i n t e r n a t i o n a lconsu l tan t s tha t p repared the major i ty o f p ro jec t s , poor da ta , o r a l ack of exper t i sewithin the nat ional administrat ions. Never-the less , the Commiss ion ensured tha t rev-e n u e - g e n e r a t i n g p r o j e c t s a l l h a d a t l e a s ta comple te f inanc ia l ana lys i s . I t accep tednon-quant i f i ed soc io-econmic ana lyses o rs ta tements in p lace of a comple te CBA forenvironment project s, in view of the absenceo f a g e n e r a l l y a c c e p t e d m e t h o d o l o g y f o rquant ifying environmental benefi ts and thef a c t t h a t t h e s e p r o j e c t s w e r e i n t h e m a i ni m p l e m e n t e d i n o r d e r t o c o m p l y w i t h E Udirect ives.

23.(a)T h e 2 0 0 0 0 1 I S PA p r o j e c t s w e r e t h e f i r s tones in which CBA was used.

(b)Where there were inconsis tencies , the Com-mission rout inely asked for c lar i f icat ions orcorrect ions. These exchanges improved therel iabi l i ty of the analyses.

(c)T h e C o m m i s s i o n r e f e r s t o i t s r e p l y a tpo in t 22 .

24.The Commiss ion a t tempted to ensure tha tbeneficiar ies just i f ied their projects accord-ing to an economic and f inancial ra t ionale ,a n d b y r e f e r e n c e t o c o n s i d e r a t i o n s s u c has v iab i l i ty and a ffordab i l i ty to the popu-la t ion se rved . However, fo r env i ronmenta lprojects costbenefi t analysis was of l imitedrelevance where there were no al ternat ivesand the projects had to be carr ied out any-way to implement the acquis . In some casesa be t te r cos tbenef i t ana lys i s would havede layed the pro jec t wi thout add ing muchvalue.

27.The Commission made every effor t to moni-to r the p ro jec t s and he lp na t iona l au thor i -t ies to mit igate the consequences of delays.S p e c i f i c a c t i o n p l a n s w e r e p r e p a r e d i ns o m e c o u n t r i e s f o r t h e m o s t p r o b l e m a t i cprojects .

28.B y t h e e n d o f S e p t e m b e r 2 0 0 8 , a f u r t h e rthree of the projects in the sample had beencompleted by the or iginal date .

30.While de lays a re ce r ta in ly no t uncommonfor large infrastructure project s , in the par-t i c u l a r c a s e o f I S PA b e n e f i c i a r y c o u n t r i e sthe f i r s t ISPA pro jec t s were v ic t ims of thes ta r t -up phase of a new ins t rument in thecandida te count r ies . There was no exper i -e n c e w i t h e x t e r n a l i n v e s t m e n t a s s i s t a n c ep r o g r a m m e s o n t h i s s c a l e p r i o r t o I S PA .H o w e v e r t h e l e a r n i n g c u r v e ( b o t h i n t h eaccession countr ies and in the Commission)improved s ign i f ican t ly f rom the middle o f the programming period onwards.

In genera l , de layed tender ing procedureswere the main fac tor. Once works s ta r ted ,m o s t p r o j e c t s m a d e g o o d p r o g r e s s . T h eex an te c o n t r o l b y t h e E C d e l e g a t i o n s o f p rocurement was manda tory. Delays wereone of the costs of ensuring value for moneythrough fa i r and t ransparen t p rocurementprocedures.


37/44


35

31.(a)I S PA w a s i n t e n d e d t o p r o v i d e c a n d i d a t ecountr ies with experience in this area duringthe pre-accession period, so that they wouldhave fewer p rob lems wi th us ing the S t ruc-tu ra l and Cohes ion Funds a f te r access ion .Delays due to ex ante control procedures andretendering were one of the costs of ensur-ing fair and t ransparent procurement . Othercont r ibu tory fac tors were inadequa te l anda c q u i s i t i o n p r o c e d u r e s a n d b u r e a u c r a t i cbui lding permit processes .

Textbox 5P r o c u r e m e n t p r o c e d u r e s i n L a t v i a h a v emuch improved s ince the s tar t of ISPA. Forinstance, tenders for Cohesion Fund projectsapproved in 2005 were launched prompt lyand implementatio n of most projects startedin 2006 .

The importance of a fair and effect ive ten-dering procedure must take precedence overthe r isk of delays.

Textbox 6Retendering protected the Community inter-est in this case. Work has s ince resumed onthis project .

(c)T h e C o m m i s s i o n r e f e r s t o i t s r e p l y a tpo in t 30 .

Textbox 7For large and complex infrastructure projectswhich are expected to be implemented overthe period of several years i t is not uncom-mon for cer tain adjustments to be requiredto ini t ia l plans.

(d)The Commission provided guidance in Janu-a r y 2 0 0 5 t o a v o i d p r o b l e m s i n t h e t r a n s i -t ion from ISPA to Cohesion Fund rules in the10 new EU Member States af ter accession.

32.D e l a y s h a v e m a i n l y b e e n d u e t o e n s u r i n gcompliance with procurement rules in orderto protect the Communit ies f inancial inter-est. Such delays and the associated potentialcost increases due to la te tendering ar e theprice to pay for f inancial soundness, a factwhich the Court has recognised in i ts previ-o u s a u d i t s o f I S PA , w h e r e i t h a s a c k n o w l -edged the benef ic ia l e ffec t o f the ex ante control by EC delegat ions (e .g. , point 8 .42 of the Courts 2003 annual report) . In any case,faster approval of f lawed tender documentsmight well have resul ted in higher bids or tod ispu tes l ead ing in the end to much h ighercosts .

Delays due to c la r i f i ca t ion of app l ica t ionsa n d c o s t b e n e f i t a n a l y s e s m u s t a l s o b eaccepted.

33.The fai lure to keep to ini t ia l cost est imateswas due to inadequate project preparat ion,d e s p i t e t h e u s e o f i n t e r n a t i o n a l c o n s u l t -an t s , and a l so to poor cos t con t ro l dur ingi m p l e m e n t a t i o n . S o m e c o u n t r i e s s u f f e r e dhigh cost inf lat ion in the construct ion sectordue to fas t economic growth . As a genera lr u l e I S PA f i n a n c i n g m e m o r a n d a w e r e n o ta m e n d e d t o a l l o w f o r c o s t i n c r e a s e s t h u sput t ing pressure on na t iona l au thor i tes totake act ion to control these.


38/44


36

35.The sharp acceleration of inflation in some of the new Member States af ter accession wasunexpected and not predicted by the f inan-c ia l ins t i tu t ions . I t was due to rap id pr iceincreases of specif ic raw mater ials on worldm a r k e t s a n d f a s t e c o n o m i c g r o w t h i n t h emajority of the new Member States wh ich ledto a boom in the construct ion sector resul t -ing in above-average pr ice increases in theindustry.

36.Other factors contr ibut ing to cost overrunsincluded:

p r o j e c t s b e i n g s u b m i t t e d t o t h e C o m -miss ion a t a very ear ly s tage where nodetailed technical documentation for thebest solut ion exis ted;e u r o / n a t i o n a l c u r r e n c y e x c h a n g e r a t ef luctuat ions, especial ly in favour of thenat ional currencies .

(a)The underest imation of costs sometimes ledt o n o b i d s b e i n g r e c e i v e d a t t h e p l a n n e dprices .

(b)Delays of ten occur red be tween the awardof the gran t and the s ta r t o f the cons t ruc-t ion phase.

37.ISPA also had other object ives, of which themain one was to prepare for using the Struc-tural and Cohesion Funds. The relat ively lowallocat ion of ISPA in relat ion to needs meanstha t i t cou ld on ly beg in to c lose the in f ra -s t ruc ture gap .

39.By the end of September 2008 a further threeof the projects had been completed.

Textbox 10Second paragraph: While at the t ime of theaudit ful l compliance with EU standards hadnot been achieved, the Commission expectsth i s to be the case a f te r comple t ion of theproject .

Textbox 11Second paragraph: The Commission is moni-tor ing the implementat ion of this project inorder to accelerate i ts complet ion.

41.By the end of September 2008 a fur ther fourof the projects had been completed.

CONCLUSIONS ANDRECOMMENDATIONS

43.(a)The inadequate preparat ion was pr incipal lydue to l ack of capac i ty and in some casesto the var iab le per formance of the in te rna-t iona l consu l tan t s used , ra ther than to theavai labi l i ty of guidance documents .

Guidance was also given through the detailedapplication forms which were made availablein 1999 and procurement p rocedures wereexplained in the guidance developed underprevious pre-accession instruments .

(b)Procedures (for example, procurement) arenecessary to protect the taxpayer. They maybe lengthy.

D e s p i t e t h e d e l a y s , b y t h e e n d o f S e p -tember 2008 , 80 of the 279 in f ras t ruc tureprojects had been physical ly completed.


39/44


37

(c)B y t h e e n d o f S e p t e m b e r 2 0 0 8 a f u r t h e rseven of the 32 pro jec t s aud i ted had beencompleted.

44.T h e C o m m i s s i o n a g r e e s w i t h t h e C o u r t srecommendat ion and wil l cont inue to moni-to r c lose ly the implementa t ion of ex- ISPApro jec t s . Some pro jec t s wi l l be eva lua teda s p a r t o f t h e 2 0 0 0 0 6 ex post e v a l u a t i o nexercise , paying part icular a t tent ion to costoverruns and delays in implementat ion andi n c l u d i n g r e c o m m e n d a t i o n s o n h o w r i s k analysis (an important but of ten weak partof costbenefi t analysis) can be improved.

The new regulations for pre-accession assist-a n c e w e r e a d o p t e d i n 2 0 0 6 a n d 2 0 0 7 . T h en e w a p p r o a c h i s m u c h w i d e r t h a n u n d e rISPA with i ts narrow focus on infrastructurep r o j e c t s , a n d i s i n f a c t a m i n i - S t r u c t u r a lFund. The regional development componentof IPA takes up ear l ier recommendat ions of the Court regarding the adequate prepara-tion of candidate countries for the StructuralFunds . The Commiss ion has a l so d i scussedthe problems of delays with Member Statesin the Funds Coordinat ion Committee, pro-posing solut ions.

B e s i d e s t h e t e c h n i c a l a s s i s t a n c e f a c i l i t y,Jaspers which is avai lable in the new Mem-ber States, other means of improving projectp r e p a r a t i o n a n d i m p l e m e n t a t i o n t h a t t h eCommission is encouraging include s tar t ingapproval procedures ear ly with pre-apprais-a l s and advanc ing tender p repara t ion .


40/44


41/44

European Court of Auditors

Special Report No 12/2008The Instrument for Structural Policies for Pre-Accession (ISPA), 200006

Luxembourg: Office for Official Publications of the European Communities

2009 37 pp. 21 x 29.7 cm

ISBN 978-92-9207-161-5

doi: 10.2865/55186


42/44


43/44

How to obtain EU publicationsPublications for sale:

via EU Bookshop (http://bookshop.europa.eu); from your bookseller by quoting the title, publisher and/or ISBN number;

by contacting one of our sales agents directly. You can obtain their contactdetails on the Internet (http://bookshop.europa.eu) or by sending a faxto +352 2929-42758.

Free publications:

via EU Bookshop (http://bookshop.europa.eu);

at the European Commissions representations or delegations. You can obtaintheir contact details on the Internet (http://ec.europa.eu) or by sending a faxto +352 2929-42758.


44/44

ISPA WAS ONE OF TH E INSTRUMENTS TO ASSIST T HE CANDIDATE

COUNTRIES OF CENTRAL AND EASTERN EUROPE IN THE PREPARATION

FOR ACCESSION TO THE EUROPEAN UNION. IT SUPPORTED PROJEC TS

IN THE ENVIRONMENT AND TRANSPORT SECTORS. IN THIS REPORT THE

COURT ANALYSES WHETHER THERE WAS A COHERENT STRATEGY AND

ADEQUATE PREPARATION, WHETHER PROJECTS WERE IMPLE MENTED

ACCORDING TO PLAN AND WHETHER PROJECTS CONTRIBUTED TO

COMPLIANCE WITH THE EU ENVIRONMENTAL DIRECTIVES AND TO

THE IMPROVEMENT OF TRANS EUROPEAN NETWORKS.

EUROPEAN COURT OF AUDITORS

Q J -A B - 0 8 - 0 1 2 -E N - C

european court of auditors - the instrument for structural policies for pre-accession (ispa),...

Documents